JUDGEMENT
S.K. Jain, Judicial Member -
(1.)THE assessee-firm was evidenced by an instrument of partnership made on the 16th March, 1977. It was constituted by four partners as under :
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THE said deed of partnership was signed by Shri Rameshlal Mehan and Shri Amarjit Kumar Puri in their individual capacities and so also in the capacities of each of them being constituted attorneys of Smt. Sarojkanta Mehan and Shri Vijaykumar Puri respectively since they were at that time out of India. Application for registration under Section 184(2) of the Income-tax Act, 1961 was made to the ITO. It was signed by Shri Amarjit Kumar Puri for himself and also for the remaining three partners who were stated to be in UK THE ITO rejected the application for registration on the ground that neither the deed of partnership, nor the application in Form No. 11 for registration was signed by all the partners personally. According to him, for a deed of partnership and application for registration being valid, it is essential that both the documents should be signed by all the partners personally. THE assessee went in appeal before the CIT(A) with the contention that it was not necessary that the instrument of partnership should be signed by all the partners. Reliance was thereby placed upon CIT v. R. Dwarkadas & Co. [1971] 80 ITR 283 (Bom.) and Jagan Nath Pyare Lai v. CIT [1973] 92 ITR 207 (Punj. & Har.). THE CIT(A) agreed with the said contention of the assessee and observed as under :
It is not necessary that the partnership agreement should be signed by all the partners. If the agreement had not been signed by some partners but they had assented to the agreement, the firm would be entitled to registration. In fact an 'Instrument of Partnership' does not mean only a regular partnership deed. THE instrument of partnership may in fact be contained in a number of "documents, correspondence or letters and in that event all these documents together would constitute the instrument of partnership. Thus, the mere fact that partnership deed was not signed by all the 4 partners personally and that 2 partners had signed on behalf of the remaining two is not fatal to grant of registration, particularly when the two partners who signed on behalf of non-resident partners held valid powers of attorney to do so. It is also observed that the two Non-residents partners have also subsequently written letters to the I.TO, Dewas, on 5-8-1978 affirming that they had authorised the other two partners to sign on their behalf .
THE CIT(A), therefore, directed the ITO to grant registration to , the assessee-flrm if other conditions were fulfilled.
(2.)Aggrieved by the said order of the CIT(A) the Department has come up in appeal. Contention of the learned DR is that the instrument of partnership and the application for registration, in order to be valid, must be signed by all the partners personally. In support he placed reliance upon judgment of the Hon'ble Supreme Court in CIT v. Jagan Nath Pyarelal [1985] 156 ITR 220 by which the judgment of the Punjab and Haryana High Court in Jagannath Pyarelal v. CIT [1973] 92 ITR 207 relied on by the assessee before the CIT(A), has been reversed. Referring to the Explanation to Sub-Section (3) of Section 184 he argued that in case of any partner who is absent from India, the application might be signed by any person duly authorised by him in this behalf or by a person entitled under law to represent him. According to him, in the instant case, the application was signed by Shri Amarjitkumar Puri only who was not authorised by Shri Rameshlal Mehan and Smt. Sarojkanta Mehan for the purpose.
None appeared for the assessee except that the copies of deed of partnership and the special power of attorney dated 3rd September, 1976 executed by Shri Vijaykumar Puri in favour of Shri Amarjitkumar Puri and the other dated the 16th February, 1977 executed by Smt. Sarojkanta Mehan in favour of Shri Rameshlal Mehan have, been filed.
(3.)IN our judgment, learned Section CIT(A) fell in error in treating the said deed of partnership and the application for registration as valid. IN Jagan Nath Pyare Lal's case (supra) the Hon'ble Spureme Court observed as under :
The law enjoins that the deed of partnership must be signed personally by each partner and this position is settled by the decision of this Court in Rao Bahadur Ravulu Subbarao v. CIT 30 ITR 163 at page 166.
The point in issue is thus concluded by the aforesaid observation of the Hon'ble Supreme Court. Further, the following observations of the Hon'ble Bombay High Court in A. Phiroj & Co. v. CIT [1966] 59 ITR 645 may be referred to with advantage :
The word 'instrument', therefore, as used in Section 26A of the INdian INcome-tax Act will mean a document of a legal nature, by which any right or liability is or purports to be created, transferred, limited, extended extinguished or recorded....A document in order to create rights or liabilities or even to record rights and liabilities, must be executed by the parties, whose rights or liabilities the document creates or whose rights and liabilities it records. A mere piece of paper on which appears a recital of certain rights and liabilities could not by itself be able to fasten the said rights and liabilities to any particular person.
IN the instant case, it is to be seen that the deed of partnership has been signed by the two partners as each of them constituted attorney of each of the other two partners. Now, the main question is as to whether the said two partners could act on behalf of the other two partners even under the special power of attorney. The two partners acted as agents of the other two partners on whose behalf they subscribed signatures to the deed of partnership. An 'agent' as denned in Section 182 of the Contract Act, is a person employed to do any act for another or to represent another in dealings with third persons. The essential point about an agent's position is his power of making the principal answerable to third persons. There cannot be any act by an agent on behalf of the principal when the contracting parties are the agent and the principal themselves. IN the instant case, the agents, namely, Shri Rameshlal Mehan and Shri Amarjit Kumar Puri were themselves contracting parties with their principals, namely, Smt. Sarojkanta and Shri Vijaykumar Puri, respectively. IN such a situation, where the contracting parties are none else but the agent and the principal, the terms of contract must be signed by the principal himself and not through the agent. IN this view of the matter, the application for registration as well could not be signed by Shri Amarjit Kumar Puri only for and on behalf of the remaining three partners, even though those three partners were absent from INdia. The Explanation to Section 184(3) of the INcome-tax Act requires signature by any person duly authorised or by a person entitled under law to represent the absentee-partner. Shri Amarjit Kumar Puri cannot be said to be duly authorised by the other three partners with whom he was a contracting party and was not a third party. Moreover, Shri Amarjit Kumar Puri had no power of attorney for and on behalf of Shri Rameshlal Mehan and Smt. Sarojkanta Mehan. Thus, there was no valid application made to the ITO for registration. The 1TO, therefore, rightly rejected the application. Consequently, the order of the CIT(A) is reversed and that of the ITO is restored.